Ben Schneiders and Royce Millar

The Warrnambool meat company at the centre of conflict of interest claims involving Premier Denis Napthine will benefit from an additional $600,000 in state government money that will see funding diverted from community projects.

After weeks of controversy over his racing interests, Dr Napthine announced on Friday, May 23, that he would sell his share in racehorse Spin the Bottle, co-owned with Colin McKenna, the head of Midfield Meat, a thriving meat business in the Premier's electorate.

On the following Monday, Warrnambool City Council, in the Premier's electorate, formally backed a deal involving the sale of Crown land to Midfield.

The deal will require the shrinking of the council's works depot to allow Midfield to diversify into dairy processing. The costs of this shrinkage far outweigh the money to be made from the sale.

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Leaked council documents show the cost to governments of the deal will be shared between a $600,000 state government grant that had previously been earmarked for four road and other community infrastructure projects, while council will contribute $210,000.

It is in addition to a separate $1.5 million grant to Midfield, announced in March, for an expansion of its meat interests.

Statewide focus on the racehorse saga has highlighted major conflict-of-interest claims for Dr Napthine and the tight clique of powerful local interests that dominate local politics in the Premier's remote south-west Victorian electorate.

Warrnambool councillor Peter Hulin said the land deal was unusual. ''From my experience with council I've never seen anything that's so complex be so rushed and have so much attention be given to it. It seems very curious.

''The fact is that Warrnambool City Council has halved its depot size and cost the community money,'' he said. ''What other business would halve the working area size and pay money to do that and then leave yourself vulnerable in the future for expansion. It's bloody insanity.''

Council chief executive Bruce Anson has refused to answer questions about the Midfield subsidy that involves the land being sold to the company for $1.7 million. To allow the deal to go ahead required changes to a state government

infrastructure program and the approval of Regional Development Victoria (RDV).

Reports to the council on the Midfield deal explain that both Midfield and the government had ''requested'' that council help facilitate Midfield's expansion. Both the government and the council have refused to detail how that request was made, or by whom.

But Dr Napthine has confirmed that in November he met Mr McKenna to discuss the company's expansion plans.

It is understood that before this meeting Midfield's request to government for financial help with the land deal was rejected by RDV. Council documents indicate that around this time Midfield and the government turned to council seeking help.

As revealed by The Age, leaked council documents, and memos obtained from within the Premier's office, point to a close involvement in the Midfield expansion by the Premier and those around him.

Confidential council documents from February said: ''As this report highlights, the proposed Midfield expansion is a regionally significant project but also of state significance given the Premier's direct involvement.''

The council decision was backed by a majority of councillors and the Premier has said when it came to the land deal he had ''acted in accordance with departmental advice at all times''.

A spokesman said on Sunday the Premier had acted properly and the anti-corruption watchdog had ''found no evidence of any wrongdoing''.

Dr Napthine and Mr McKenna have a number of links, beyond racehorse Spin the Bottle. The two men work together as co-founders of a local cancer charity, while Mr McKenna's image, along with others, was used to advertise a fund-raising function for Dr Napthine during the Warrnambool racing carnival.

The Premier has repeatedly insisted that nothing was inappropriate about the government's support for Midfield, nor that he had a conflict of interest through his horseracing partnership with Mr McKenna. ''I have not used my position to influence or interfere in any of those legitimate decision-making processes,'' he told ABC radio.

Last month, The Age also revealed a string of shares in horses that Dr Napthine, who is also Racing Minister, had failed to declare in his long parliamentary career.

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